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Two out of every five Canadians have used non-bank alternatives for financial services in the past year, according to a survey released Friday — the latest indicator of a shift in consumer sentiment away from traditional banking.

Nearly 30 per cent of survey respondents reported being less dependent on their banks for financial transactions, financial consultancy Ernst & Young’s 2016 Consumer Banking Survey found. There was no comparison period stated in the open-ended question and there is no similar data from previous years as it’s the first time those questions have been asked.

In addition to the 40 per cent who have already signed up at non-bank financial hubs, 20 per cent of those surveyed said they plan to use them in the near future. Non-banks include fintech players as well as other alternatives such as investment firms, retailers who offer financial services or credit unions that do not have branches.

“What this is signalling is a willingness of customers to try something different, to embrace innovation and to embrace a different way of dealing with their financial affairs,” said Paul Battista, EY’s financial services advisory leader.

“I think these are unignorable signals from the market of the willingness of consumers to adapt and change their behaviour patterns and I think the banks have to respond.”

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Consumers are increasingly interested in financial technology alternatives as they seek out better customer service and simpler products, he said.

“Banks have to avoid complacency,” he said.

“In the marketplace, there’s really an opportunity here that these fintechs and non-banks are seizing on to address unmet needs and that’s why there’s this adoption and the interest is as high as it is.”

As fintechs take an increasing share of the market, banks need to compete by reinforcing their trust and brand values as well as invest in better customer experiences, he said.

The survey suggests Canadians have overall favourable ratings of their banks on those core values.

While a whopping 96 per cent trust their bank to keep their money safe, about 20 per cent said they have little or no trust that banks provide unbiased advice.

Physical branches also still appear be an advantage for banks.

The survey suggests that while 77 per cent of consumers go online to conduct research, 59 per cent still want to speak with someone to get advice or sign up for a product.

But the survey also found that part of the non-bank allure is the customer experience. Three out of four of the top reasons consumers said they’d consider an alternative provider related to the experience — including access to different products, ease of use and better online experience.

Much of the shift is being driven by millennials, who value different things such as ease-of-use in their banks, compared to previous generations, said Eric Kirzner, a finance professor at the University of Toronto’s Rotman School of Management who also advises several Canadian fintech players.

“Traditional banking and traditional investment services are starting to give way to new ways of transacting,” he said.

“There’s a lot of investors out there who don’t really want to deal with an investment adviser directly but who would rather open up an account online, get some advice but start transacting online.”

The survey results appear to be at odds with EY’s own Fintech Adoption Index released in January, which showed just 8 per cent of digitally active Canadians have used at least two fintech products in the last six months. That was below the global average of 15.5 per cent.

The discrepancy can be attributed to two factors, EY’s Battista said: the space is moving very quickly, so there’s likely been a massive increase since January and the index was specific to fintech players, leaving out other alternatives to traditional banking.

EY predicted that an increase in awareness of the alternative products and services available could triple the adoption rates within a year.

“It’s still early days in terms of the awareness and the existence of many of these fintechs and non-banks in the marketplace,” Battista said.

“We expect to see even more openness and interest to try out these providers.”

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